Can This Property Work as a BRRRR Deal? A Step-by-Step Analysis

By Ryan Woodham

The BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—is one of the best strategies for real estate investors looking to build long-term wealth. But before jumping into a BRRRR deal, you need to know how to evaluate and analyze the numbers to ensure you're making a profitable investment.

Here’s a step-by-step guide to breaking down a BRRRR deal so you can make informed investment decisions.

1. Buy – Find the Right Property at the Right Price

The first step in BRRRR investing is purchasing a property below market value to allow room for rehab costs and future appreciation. When analyzing a potential deal, consider:

After-Repair Value (ARV) – What will the property be worth after renovations?
Purchase Price – Are you buying the property at a discount?
Acquisition Costs – Factor in closing costs, title fees, and any other upfront expenses.

A good rule of thumb is to follow the 70% rule:

Your purchase price + rehab costs should not exceed 70% of the property’s ARV.

Example: If the ARV is $200,000, you should aim to spend no more than $140,000 (including purchase and rehab costs).

2. Rehab – Budgeting and Managing Renovations

The second step is renovating the property to increase its value and make it attractive to renters. To analyze this step:

Create a detailed rehab budget – Identify necessary repairs, contractor costs, and material expenses.
Focus on value-add improvements – Kitchens, bathrooms, flooring, and curb appeal provide the best return.
Check the Mechanicals - Ensure that key mechanicals like HVAC, water heaters, and electrical panels are in good condition. If they are outdated or unreliable, replace them with high-quality, energy-efficient systems that will last. This minimizes future maintenance costs and keeps tenants happy.
Avoid over-improving – Keep costs in check to maximize profitability.

Unexpected expenses can quickly eat into your profits, so always include a 10-15% buffer in your budget.

3. Rent – Ensuring Cash Flow

Before finalizing a BRRRR deal, research the rental market to determine expected monthly rental income. Key factors to analyze:

Comparable rental rates – Look at similar properties in the area to determine a realistic rent price.
Vacancy rates – High vacancy in the neighborhood could indicate a weak rental market.
Operating expenses – Include property taxes, insurance, maintenance, and property management fees.

A good rental property should meet the 1% rule:

Monthly rent should be at least 1% of the total investment (purchase price + rehab costs).

Example: If you invest $140,000 in a property, you should aim for a minimum rent of $1,400/month. Note that not all markets will support the 1% rule. Use it more as a guide - the closer you are to the 1% rule the better.

4. Refinance – Pulling Out Your Equity

Once the property is stabilized and rented, the next step is refinancing with a long-term loan to pull out your initial investment. When evaluating the refinance stage:

Loan-to-Value (LTV) Ratio – Most lenders allow 70-75% LTV on a cash-out refinance.
Debt Service Coverage Ratio (DSCR) – Lenders want to see that the rental income covers mortgage payments.
Seasoning Period – Some lenders require a waiting period before refinancing (typically 6-12 months) and some lenders don't. That's why it's important to work with the right lender!

If done correctly, refinancing allows you to recoup most or all of your initial investment—enabling you to repeat the process with another property.

5. Repeat – Scaling Your Portfolio

The final step is reinvesting your cash-out proceeds into another BRRRR deal, allowing you to grow your portfolio without using new capital. To successfully scale:

Work with a reliable financing partner – A lender specializing in BRRRR deals can streamline funding.
Build a strong team – Contractors, property managers, and real estate agents can help execute your strategy.
Refine your process – Track key metrics (cash-on-cash return, equity growth, and cash flow) to improve deal analysis over time.

Final Thoughts

The BRRRR method is a powerful strategy for real estate investors looking to build wealth with minimal capital. By carefully evaluating each step—buying at the right price, managing rehab costs, ensuring strong rental income, refinancing wisely, and reinvesting strategically—you can maximize returns and scale your portfolio efficiently.

Need help securing financing for your next BRRRR deal? Unlocked Capital Partners specializes in investment property financing, helping investors like you find the best funding solutions. Contact us today to discuss your deal!